Top 6 Tips for Hiring Independent Contractors

Independent contractors are those who work outside of the company of their employer.

Independent contractors typically work for themselves and are considered employees in the eyes of state law.

Similar to employees, they have to adhere to federal law on employment. Federal law obliges employers to adhere to certain requirements for working with independent contractors.

Employing an independent contractor takes careful consideration of the legal rules and regulations. Employers often employ independent contractors as they are time-saving, cost-effective and stressful.

However, they may be liable if the relationship goes south. Additionally, they may be unable to claim tax benefits.

What is an Independent Contractor?

Self-employed independent contractors can be described as self-employed employees. They could be partnerships, sole traders or limited liability corporations. They operate under an agreement for services for a specific period or on an on-demand basis. The employees, on the other hand, work on a contract of employment.

A contractor who is independent agreements with clients to provide specific services to their clients to be paid. The relationship is principally contractual, and the contractor typically has the business themselves (whether as a sole proprietor, the limited-company structure, or any different business entity or structure). The obligations for both sides are restricted mostly by the specific clauses in the contract.

An employee signs a contract with his employer through electronic signature tool to provide ongoing services to the employer's business. The contract is in place; however, the law and rules heavily control the relationship.

Difference Between Employee and Independent Employees

Although a company can pay employees and freelancers for a similar job as per the U.S Department of Health and Human Services, the major distinction is in taxes, Social Security, and Medicare. The business withholds these taxes from employees' wages, while an independent contractor doesn't receive tax deductions.

Full-time employee: An employee who works for one employer. The employer determines and supervises the tasks performed along with the timing and location of work. Employees are entitled to benefits from the company, including stock options 401(k), paying time off, matching or health insurance. Additionally, they are entitled to the legal benefits that come with an employee with a W-2, which includes Unemployment Insurance and Workers' Compensation.

Independent contractor: An individual who runs a business as an independent entity can complete tasks for many clients. Independent contractors determine the time, place and how they finish the work specified by their agreement. They usually submit an invoice for work completed and supply their equipment and tools. They are accountable for the employer and the individual tax aspects (FICA). They do not have access to corporate benefits.

This is a breakdown of the differences in other areas and also:

Employee

• In the United States, federal and state laws on employment and labor.
• Offers tax information by using the W-4
• The claimant claims Tax information on the W-2
• Information to Unemployment Insurance
• Earns an hourly or salary
• Keeps a steady pay period

Independent Contractor

• Not covered by employment or labor laws
• Gives tax information with W-9
• The report reports payments of more than $600 using 1099
• Contract payments can be per hour, day-to-day, weekly or even per project

Here are Six Tips for Hiring Independent Contractors Safely and Effectively.

If you're considering hiring contractors, we suggest that you follow these steps:

Always Check References

The most reliable way to verify that a person is qualified to be an independent contractor is by checking references. Certain states permit employers to request copies of former clients' business cards. Others require employers to confirm references by conducting phone interviews and personal visits.

Employers should contact references directly and request evidence of their qualifications. Make sure you keep records of your calls and take notes on conversations. Note down the details you get from each source.

Don't Use Contracts Without Limits On Liability

Independent contractors are often employed without contracts. State laws stipulate that employers must protect their employees from the risk of liability. Most state employment laws demand employers not to sign contracts with digital signatures limiting liability.

These restrictions could suggest that the employer is protecting itself, but it is not independent contractors. The employee has the terms of his contract and not the terms set by the employer.

Post your Job Listing in the Right Place

This might sound straightforward, but you must be sure to place your resume in the correct spot. In particular, don't use an FTE job requisition to promote the possibility of a contract position. Individuals aren't likely to search your career page or website to find a job because 99 percent of contracts need to be mentioned here.

Instead, you can consider an online marketplace specifically designed for contract work or a clearly-labeled area on your website specifically for projects requiring contract work. Marketplaces are a growing method to advertise jobs or source candidates.

Nail the Interview Process

When interviewing a candidate, review their work portfolio to ensure it is held up. During your interview, ensure to employ a series of interview questions for all candidates to compare them with accuracy.

Concentrate on projects they've worked on previously. Did the projects they've done in the past compare to what you're seeking? What should they be able to accomplish what you want them to? Of course, it is important to be punctual for interviews and establish expectations before the interview date regarding whether to be available on or off video. Late cancellations (on or off) can create negative impressions.

Consider Workers Compensation Insurance

While self-employed contractors may not technically be employees, they share the same disadvantages. Many of them are struggling financially. Many are even denied access to essentials. For example, they don't get unemployment benefits. Some don't have to pay social security contributions.

But every independent contractor is required to carry workers' compensation insurance. Furthermore, they have to file demands within 180 days of an incident. The employees are covered under government programs that provide free medical assistance and financial help. They are covered for disability as well as death benefits.

Independents are only eligible for the program if they decide to join the program. However, this requirement is flexible. In most examples, the injured contractors have to demonstrate that negligence was the cause of the accident. If they fail to prove negligence, they will not be able to claim damages.

The Key Takeaway

Independent contractors have the ability and experience when you require their assistance. Therefore, it is important to be prepared and proactive regarding how you hire them. Use the advice mentioned above to streamline your hiring campaign and recruit the best candidates to help you with your ongoing projects or expanding your business.

Independent contractors pose special issues for employers. Although they are more likely not to fall under the occupational protection law, they are nonetheless subject to the same regulations and workplace laws as employees. Due to this, employers must carefully assess independent contractors before employing them. Following the guidelines above will minimize liability risk while ensuring you are protected from unfair competitors.